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Markets in Developing Countries Parallel, Fragmented, and Black

Edited by Michael Roemer and Christine Jones

A Copublication of the International Center for Economic Growth and the Harvard Institute for International Development

ICS PRESS San Francisco, California @ 1991 International Center for Economic Growth

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This is an executive summary of the book Markets in Developing Countries: Parallel, Fragmented, and Black, edited by Michael Roemer and Christine Jones, published by ICS Press in 1991 and distributed to the trade by National Book Network, Lanham, Maryland.

Cover design by Herman + Company

Cover photo by Geoffrey Hiller

ISBN 1-55815-142-7 Contents

Preface ...... 5

Summary of Conclusions ...... 7

An Overview of Markets in DevelopingCountries ...... 11 Parallel Markets ...... 11 Fragmented Markets ...... 14 Black Markets ...... 16 What Have We Learned about Policy? ...... 17

About the Contributors ...... 20

Contents of the book Markets in Developing Countries

Part 1 Introduction

Chapter 1 Parallel, Fragmented, and Black: A Taxonomy Christine Jones, David L. Lindauer, and Michael Roemer

Part2 Parallel Markets

Chapter 2 The Behavior of Parallel Markets in Developing Countries Christine Jones and Michael Roemer Chapter 3 Parallc Markets and the Rural Poor in a West African Setting Detlev Puetz and Joachim von Braun Chapter 4 Cross-Border Trade between Niger and Nigeria, 1980-1987: The Parallel Market for the Naira Jean-PaulAzam Chapter 5 The Persistence of Shortages in Rural Black Markets David Bevan, Paul Collier, and Jan Willem Gunning Chapter 6 Government Pay and Employment Policy: A Parallel Market in Labor David L. Lindauer Chapter 7 The Parallel Market for Illegal Aliens Trien T. Nguyen

Part 3 Fragmented Credit Markets

Chapter 8 Time and Money in the Western Sahel: A Clash of Cultures in Gambian Rural Finance ParkerShipton Chapter 9 Transaction Costs and Quantity Rationing in the Informal Credit Markets: Philippine Agriculture Pan A. Yotopoulos and SagrarioL. Floro Chapter 10 Heterogeneolus Firms and Efficient Financial Intermediation in Taiwan Tyler S. Biggs

Part 4 The Black Economy

Chapter II Taxes, Corruption, and Bribes: A Model of Indian Public Finance OnikarGoswani,Anal Sanyal, and IraN. Gang

Part 5 Conclusion

Chapter 12 What Have We Learned about Policy? MichaelRoemer and ChristineJones Preface

In developing countries, where government intervention is often used as a tool to achieve economic and political goals, parallel markets arise as producers and consumers seek to evade official regulations. By lessening the effectiveness of controls, parallel markets can also diminish the benefits realized when controls are removed. Understanding how these markets work is therefore necessary for predicting the outcorme of deregulation. Only recently, however, have parallel markets become direct objects of research. The book Markets in Developing Countries is a copublication of the International Center for Economic Growth and the Harvard Institute for International Development. It is based on papers presented at a workshop sponsored by HIID to address issues relating to the dynamics of parallel markets. The authors investigate the realities of parallel, fragmented, and black markets for consumer and producer goods, labor, currency. and credit in sub-Saharan Africa, the Philippines, and Taiwan. Several chapters delineate the economic and social contribution that parallel markets make in addressing needs not met by formal markets. Other subjects explored in the book include the interaction between government policy and the behavior of parallel markets, the influence of cultural preferences on parallel markets, and the capacity of parallel marlets to increase economic efficiency and equity. Markets in Developing Countries provides insights into an important area of economic behavior. Alihough little studied or understood, the workings of parallel. fragmented, and black markets constitute an important

5 6 MARKETS INDEVELOPING COUNTRIES

issue---one that must be considered in designing effective policy reforms in developing countries.

Nicol~is Ardito-Barletta General Director International Center for Economic Growth

Panama City, Panama February 1991 Summary of Conclusions

Parallel, fragmented, and black markets represent deviations from the theoretical ideal of a well-functioning market. Parallel markets arise to evade government controls. Fragmented markets are not unified, even in the absence of controls, so that different participants face different prices for similar goods or services. Black markets, sometimes but not always parallel instructure. are characterized by adistinct implication of illegality. The impact of these markets on policy rcforn and implementation occurs in a number of ways. 1. Parallel markets generally ameliorate ill-advised policies such as contro!s over prices or quantities. When a government attempts to control official mar­ kets, parallel markets are likely to improve welfare by encouraging increases in output and avoiding real costs of access for consumers. When government at­ tempts to suppress unofficial trading, this action not only makes it more difficult for parallel marketers to serve their useful social function but also adds real costs of enforcement to society's burden. * In some circumstances, however, a parallel market can reduce welfare if it does not add substantially to total output and if traders or consumers incur high costs in that market (for example, the groundnut market in The Gambia).

7 8 MARKETS IN DEVELOPING COUNTRIES

2. Parallel markets offer an escape from bad policies that cannot be reformed.

If political or bureaucratic pressures make it difficult to deregulate markets, parallel markets offer a second­ best mechanism to allocate resources more efficiently.

3. Controls can be enforced in ways that retain some benefits of parallel markets.

" Enforcement should be especially lenient on those unofficial traders who also offer substantial quantities at controlled prices on official markets.

" When government agricultural marketing boards are charged with the task of establishing below-market prices for basic foods, there should be no quantitative restrictions on competitive marketing channels.

" It may be possible to reduce consumer costs if some­ thing approaching a costless rationing scheme can be devised (e.g,, supplying ration coupons with entitle­ ments that do not fully exhaust supplies, then allowing competition for the balance of supplies).

4. Models of parallel or black markets call into question some widely held beliefs about government policy.

* Contrary to conventional wisdom that high govern­ ment wages lead to high private wages, higher govern­ ment wages can instead lead to a greater supply of workers-and to lower wages-in the private market.

" In a country where most tax officials are likely to be corrupt, lowering tax rates can lead to a decline in revenue (as in India), contrary to the experience with tax reform in other countries. ROEMER AND JONES 9

5. When controls and parallel markets are considered in the context of general equilibrium, linkage effects between markets can yield unexpected results.

" A parallel currency market in Niger allowed its econ­ omy to be adversely affected by the monetary and fiscal policies of its larger neighbor, Nigeria.

" Contrary to expectations, a relatively small number of illegal workers (in the U.S. parallel market for illegal alien labor) can raise legal employment and tax reve­ nue significantly.

6. The existence of parallel markets reduces the expected benefit from deregulation.

" Until recently, analyses of market liberalization have proceeded as if only the official market matters, in which case deregulation brings net benefits.

* Because parallel markets are likely to increase welfare under controls, however, the net benefit from liberal­ ization is likely to be smaller than predicted.

7. When markets are fragmented, controls themselves may improve welfare.

" Controls may drive resources from the formal market into the preexisting informal market.

" Deregulation will then channel resources back into the formal market without fully incorporating the informal fragment, leaving those who purchase on the informal market worse off.

8. When markets are fragmented, the best policy is to develop new institutions that will integrate markets, and only then to deregulate. 10 MARKETS IN DEVELOPING COUNTRIES

* Studies of informal credit markets in The Gambia, the Philippines, and Taiwan shows that these markets' functions would not be replaced by the conventional banking system in a deregulated market.

* Indonesia developed a successful rural credit system operated by a government bank, integrating rural sav­ ers and borrowers into the bank's operations. When the country deregulated its financial sector, the rural cus­ tomers benefited along with everyone else in the for­ mal credit market. Similar programs should be possible in other countries. An Overview of Markets in Developing Countries

Economists' recommendations for market deregulation are generally based on two assumptions. First, government controls over market prices or quantities are effective. Second, in the absence of controls, markets would approach the competitive ideal: all participants could buy or sell at identical prices. Many different markets exist, however, in which these conditions are not met. People almost always manage to evade government controls to some extent, and even inthe absence of controls many markets are not as unified as competitive models assume. Policy makers must take these deviations from theory into account as they plan and implement market reforms, because an effective policy prescription depends on an accurate specifica­ tion of market conditions.

Parallel Markets

A parallel market is a structure generated in response to government interventions that create excess supply or demand. For example, if govern­ ment attempts to control the price of a basic commodity, less of that commodity may come to the official market at the lower, control price, while consumers demand more. This excess demand will spill over into a

11 12 MARKETS IN DEVELOPING COUNTRIES

parallel market, in which consumers will be willing to pay a higher price to obtain the commodity. Market interventions that give rise to parallel markets in developing countries include

" managed foreign exchange rates, engendering parallel and often illegal currency markets

* import licensing, which can create conditions favoring a parallel market in smuggled goods

" controls over interest rates, which may help to generate a curb market of moneylenders and borrowers

" legislated minimum wages and benefits, which can encourage parallel labor markets

" taxation-sales or value-added taxes, import and export duties, payroll and income taxes-that can generate parallel markets if the risks of evasion are not prohibitive.

Parallel markets are not necessarily illegal. They may be allowed or even encouraged. More commonly, however, governments try to enforce price or quantity control by establishing penalties for trading in parallel markets. The welfare implications for buyers and sellers depend on

" the nature of the risk function

" the ways in which consumers get access to price-controlled goods

* the resource costs involved in buying and selling on the parallel market

Detlev Puetz and Joachim von Braun examine the parallel markets in groundnuts and fertilizer among the rural poor in The Gambia, West Africa. They find that Gambian farmers sell some of their groundnuts to the official market even though the price in neighboring Senegal is higher. First, farmers face some risk, as well as higher costs, for cross-border sales. Second, farmers who sell officially also benefit from subsidized fertilizer provided on credit. ROEMER AND JONES 13

Wealth is a determinant of access to both official and parallel markets in The Gambia. When credit is tight, it is the richer farmers who are able to take ad ,antage of the parallel market, in which cash transactions predominate. Seventy-one percent of the wealthiest Gambian farmers, but only 17 percent of the poorest, sold in the cross-border parallel market. Jean-Paul Azam examines cross-border trade between Niger and Nigeria, especially the parallel market for the Nigerian currency, the naira. The naira is not convertible, but a good deal of illegal or semilegal cross-border trade in goods involves the exchange of nairas and other currency. Changes in price levels in Nigeria, a large country, are transmit­ ted to much smaller Niger through changes in the exchange rate in the parallel market. When Nigeria instituted restrictive demand policies, the price level drorFed in Niger, exacerbating the recessionary impact of stabilization polk ies adopted by Niger's own govemment. This chapter shows that macroeconomic policy prescriptions can be closely linked to the existence and behavior of parallel markets. Virtually all contributors to the literature on parallel markets assume that these markets clear. But this assumption ischallenged by David Bevan, Paul Collier, and Jan Willem Gunning, writing on the persistence of shortages in rural black markets in Africa. These authors point out that if parallel markets are illegal, the risk of detection prevents normal market mechanisms from working. Sellers are restrained in advertising their goods, seeking buyers, or testing willingness to pay, because these activi­ ties increase their chances of' being caught. For these reasons, sales are made at prices that leave some consumers with unsatisfied demand. Illegality raises the cost of acquiring information, which prevents the market fiom clearing. David L. Lindauer asks whether govemment salary levels in develop­ ing countries are responsible for high wages in the private, formal econ­ omy. To the extent that the private sector and the government compete for the same pool of talent, high gevemment salaries could be said to determine wage levels in the private sector. If, however, government decides to pay a wage above the market-clearing level but cannot afford to hire everyone who would work at that wage, the private sector is left to absorb the excess supply of workers. Using a model of the linkage between parallel and official markets, Lindauer shows that the high government wage would 14 MARKETS INDEVELOPING COUNTRIES

have no impact on wages in the parallel market (in this case, the private sector). In contrast, if government policy is to increase employment by hiring more workers, the reduced labor supply will drive up wages in the private (parallel) labor market. Trien T. Nguyen uses a mathematical model of the U.S. economy to examine the parallel market created by illegal immigrants who are willing to work for subminimum wages. This approach produces the surprising outcome that, even though illegal workers constitute only I percent of the work force, their presence raises the income of legal workers by 5 perceni and increases tax revenues by 11 percent. These effects are attributable to increased overall employment leading to higher private expenditure and to government enforcement efforts that also generate employment.

Fragmented Markets

Even in the absence of controls, markets may be divided into segments in which participants falce different prices for goods, services, or factors of production. The simplest reason for price differences is high transportation costs; people farther from the source of supply pay more than those nearby. In this case, however, markets can still be well integrated, so that changes in market conditions in one area are reflected in price changes in other areas. Certain characteristics of developing countries, however, may result in both price differences and a lack of market intermediation between different regions of production.

" For example, grain from a region with an abundant harvest may not flow to a region with a poor harvest because transportation costs are prohibitive; therefore, prices between the excess region and the deficit region remain unequal.

" Poorly de\ eloped channels of information can have the same result, if traders' cost of obtaining information about distant mar­ kets exceeds the possible profits from trading in those markets. ROEMER AND JONES 15

When market intermediation is impeded by high costs or imperfect infor­ mation, prices for goods or factors in one region may move independently from those in another region. Such conditions define a fragmented market. Credit markets iii developing countries display characteristics of both parallelism and fragmentation. Parallelism arises from credit market reg­ ulations, but informal credit institutions would exist even in the absence of govemment-created financial repression. For several reasons, one of which is imperfect information about low-income borrowers, banks may ration smaller businesses, traders, farmers, and poor households out of the formal credit market. Instead, local moneylenders and others who can acquire local knowledge at reasonable cost s;erve smaller, low-income borrowers at interest rates well above those in the formal sector. The resulting credit markets are fragmented. Parker Shipton describes a highly fragmented informal credit market in the western Sahel, with little intermediation between various transactors. In rural Gambia, where people do not rely on the banking system and where the ethical principles of Islam also affect ;ending practices, the concept of a percentage interest rate based on the loan outstanding does not always apply; people often negotiate a fixed total amount of interest payments payable over a flexible period of time. An interesting question for the future of financial institutions in this setting is whether the terms of credit transactions will become more regularized when would-be lenders have more opportunity to deposit their savings in interest-bearing accounts. Pan A. Yotopoulos and Sagrario L. Floro analyze a Philippine rural credit market that appears substantially more developed than the array of transactions observed by Shipton in The Gambia. Yotopoulos and Floro describe a market fragmented into two sets of transactions: trader-lenders who lend to rich farmers and farmer-lenders who lend to poorer farmers. The traders often lend to farmers who are already their customers or suppliers. In a farmer-lender transaction, land is typically pledged as collateral. In both types of transaction, the loan is linked to the primary occupation of the lender, whether trad,:c or farmer. Tyler S. Biggs describes how small, family-controlled firms in Tai­ wan-the kind that banks typically ration out of the formal credit market­ have been served by a sophisticated set of institutional arrangements through nonbank channels in the informal orcurb market for credit. Among 16 MARKETS IN DEVELOPING COUNTRIES the most important of these institutions have been legally sanctioned, postdated checks, which are discounted in a secondary market. Since small and medium-sized firms have played an important role in Taiwan's devel­ opment, the evidence suggests that the development of the curb market improved the allocative efficiency of credit and was itself crucial to Taiwan's export success. Both the Philippine and Taiwan studies argue that if government removes interest rate and credit controls, formal financial institutions are not likely to replace or absorb the informal credit market. An expansion of credit through the formal sector may not increase the supply of credit to the borrowers-the poorer ones-who present the greatest risk and are willing to pay the most for loans. The traders, who would receive much of the additional credit, would probably prefer, in tum, to lend to rich farmers rather than to poor ones. If ne w credit is directed to poor farmers who pledge land as collateral, the rate of land consolidation, through foreclosures, is likely to increase. In Taiwan, financial liberalization could reduce the total supply of credit and worsen allocative efficiency, in the following way: Deregulation of interest rates would stimulate a transfer of funds fr'om the informal to the formal financial market. Banks, which are inclined to ration credit, would use these funds to expand loans to finns that !hey traditionally serve. Further, reserve requirements, which apply to banks but not to lenders in the curb market, would reduce total lending. These cases illustrate how fragmented credit markets can lead to outcomes different from those predicted by models of strictly parallel markets that clear through price changes.

Black Markets

For decades, black market was the term of choice for parallel markets and remains in common usage for parallel foreign exchange and goods markets. But the term is not just a synonym for parallel.

* First, the term black market has a distinct implication of illegal­ ity-and not all parallel markets are illegal. ROEMER AND JONES 17

Second, not all black markets are parallel. Black can refer to the market for prohibited goods (such as cocaine or firearms) for which there is no legal market, hence no parallelism.

Third, black money is an expression used, especially in India, to denote income that has evaded taxes or been acquired illegally and hel 5 in liquid form. Such funds are derived and then circulated in a black economy, a term that is analogous to the notion of the underground economy.

Efforts to avoid taxes may give rise to secondary parallel markets. If money earned from unrecorded transactions must be laundered to be useful, it will be offered at favorable terms on credit or foreign exchange markets, thus creating parallel financial markets. If, however, there is no risk in spending money earned from unrecorded transactions or income tax evasion, no laundering process develops, and the parallel markets are limited to tax-evading transactions siuch as the hiring of workers at wages below the minimum or not paying employment taxes. Thus, income tax evasion, to the extent that no laundering of undeclared income is necessary, does not give rise to a parallel market. In their discussion of taxes, corrupiion, and bribes in India, Omkar Gosvarni, Amal ,anyal, and Ira N. Gang analyze risk and enforcement functions to examine the impact of tax policy when individuals pay bribes to avoid declaring their income. They use a mathematical model, which shows that an increase in tax rates, combined with an increase in the probability of an audit, will increase tax revenues at the same time that it optimizes net revenue to government. This finding is contrary to the conventional wisdom that a decrease in tax rates will increase tax revenues. This model has important implications for efforts in developing countries to reduce fraud in income or customs taxes and highlights the importance, in analyzing black markets, of specifying what determines self-aggrandiz­ ing (or economic rent-seeking) behavior.

What Have We Learned about Policy?

The best prescription for government would be to give up is controls, deregulate the market, and seek other means to achieve the economic aims 18 MARKETS IN DEVELOPING COUNTRIES that unfettered markets are able to serve. Such a policy would make parallel markets irrelevant. Failing that, and accepting the inevitability of some controls in most countries, the second-best prescription for government policy would be to relax enforcement of controls and let parallel markets work. If government is unwilling to give up certain controls, there is still scope for policies to reduce the welfare costs of controls.

1. Government enforcement of controls should be lenient for parallel market traders who also sell substantial amounts at controlled prices on official markets. This would encour­ age more goods to be offered at official prices. One ap­ proach would be to allocate official market quotas to producers and to ignore unofficial market sales if the quotas have been fulfilled.

2. When below-market prices are officially established for basic foods, competitive marketing channels should not be subject to quantitative restrictions. Parallel marketers who can operate within the limits established by official farmer and consumer prices should be permitted to obtain price­ controlled produce, thus benefiting both farmers and con­ sumers.

3. Research suggests that consumer costs could be reduced if a low-cost rationing plan could be worked out. Although it is almost impossible to devise ration schemes that elimi­ nate all consumer transactions costs, a practical alternative is to supply ration coupons with entitlements that do not fully exhaust supplies, then allow competition for the bal­ ance of supplies.

4. Just as the existence of parallel markets ameliorates the impacts of government market interventions, the benefits of removing controls are reduced by the operation of illegal markets. Once we recognize that parallel markets are likely to increase welfare under controls, we must admit that the net benefit from liberalization is likely to be smaller. ROEMER AND JONES 19

5. When parallelism exists along with fragmentation, it is even possible that market controls improve welfare by driving resources from the formal market into the preex­ isting informal market, as happens with curb markets in repressed financial systems. Inthat case, liberalization will channel resources back into the forma! market without fully incorporating the informal market (because fragmen­ tation is the result of inherent characteristics of the market, and not of policy intervention). Those who purchase on the informal market will then be worse off. 6. Once parallel markets arise in response to controls, the economy becomes more difficult to manage. Policy ana­ lysts and decision makers need to come to grips with the confounding effects of controls and parallel markets on economic policy. There are almost always better ways to achieve govemment's economic goals than to control prices or quantities. About the Contributors

MICHAEL ROEMER is an institute fellow at the Harvard Institute for Inter­ national Development. He has been an economic adviser in Kenya, Tan­ zania, and Ghana, as well as Indonesia, where he was resident coordinator of several projects for HIID. In collaboration with Christine Jones, he organized the HIID-sponsored workshop on parallel markets that led to this volume and to the special issue of World Development on parallel markets (December 1989). Roemer, who received his Ph.D. from the Massachusetts Institute of Technology, has published a number of books, including Modernizationofthe Republic of Korea:Growth andStructuralTransfor­ mation (with Kim Kwang Suk) and Economics of Development (with Malcolm Gillis, Dwight Perkins, and Donald Snodgrass).

CHRISTINE JONES is an economist in the Central and West Africa Country Operations Division of the World Bank, where she specializes in develop­ ment concerns of the Congo. She received her Ph.D. in economics from Harvard University, where she has also been an institute associate at the Harvard Institute for International Development and has taught African economic development. Jones has lived and worked in Cameroon and Zaire and has served as a development adviser in The Gambia and Malawi. She has published papers on women's labor issues.

These individuals contributed to the volume Markets in Developing Coun­ tries,from which this executive summary is taken.

20 ROEMER AND JONES 21

JEAN-PAUL AZAM is a professor of economics at tie University ofClermont- Ferrand, France. He holds advanced degrees in economics, sociology, and mathematics, including doctorates in economics from the London School of Economics and the University of Aix-en-Provence, France. He has carried out advisory missions in Bangladesh and in a number of developing countries in Africa and has acted as a consultant to the Organization for Economic Cooperation and Development, the United Nations, and the World Bank. Azam has published numerous papers on issues in economet­ rics and development economics and is the author of several books, among them The Inpactqj'Macroeconomi Policies on the Rural Poor.

DAVID BEVAN is a lecturer in economics at Oxford University and a fellow of St. John's College. He has been a consultant to the World Bank, the International Labour Office, and the Organization for Economic Cooper­ ation and Development. He is a member of the Unit for the Study of African Economies at the Institute of Economics at Oxford. Bevan has written, with Paul Collier and Jan Willem Gunning, Peasantsand Governments: Al Economic Analysis and Controlled Open Economies: A Neoclassical Approachto Structuralism.

TYLER S. BIGGS is an economist at the Harvard Institute for Intemational Development. He has conducted research on agricultural policy and on urban and rural development and is currently studying industrial organiza­ tion in developing nations. He has served as West African representative for the Ford Foundation and as a consultant to the World Bank and to the U.S. Agency for International Development. He is the author of a forth­ coming book, The Evolution ofIndustrial Structure in Developing Coun­ tries.

PAUL COLLIER is a specialist in international development economics at Oxford University and a fellow of St. Antony's College. He has been a consultant to the World Bank, the International Labour Office, and the Organization for Economic Cooperation and Development. Collier founded the Unit for the Study of African Economies at the Institute of Economics at Oxford and has written, with David Bevan and Jan Willem 22 MARKETS IN DEVELOPING COUNTRIES

Gunning, Peasants and Governments: An Economic Analysis and Con­ trolled Open Economies:A NeoclassicalApproach to Structuralism.

SAGRARIO L. FLORO is an assistant professor of economics at the American University, Washington, D.C., and a research associate of the Philippine Resource Center in Berkeley, California. An adviser to the Agricultural Credit Policy Council of the Philippines, shc is currently working on the market structure of financial systems in developing countries and on the effect of financial liberalization on the informal sector. Floro, who received her Ph.D. from Stanford University, has written, with Pan A. Yotopoulos, Informal Rural Credit Markets: The New InstitutionalEconomics Ap­ proachin the Philippines.

IRA N. GANG is an assistant professor of economics at Rutgers University. He has also taught at the Claremont Colleges, California, and at Duke University. Gang received his Ph.D. from Cornell University. A frequent visitor to the Indian Statistical Institute, New Delhi, Gang has published extensively on theoretical models oflabor markets in developing countries, on foreign aid, on multinationals, and on growth and development policy.

OMKAR GOSWAMI is an associate professor of economics at the Indian Statistical Institute, New Delhi. He earned a doctorate from Oxford and has taught at the Delhi School of Economics and Jawaharlal Nehru University, New Delhi. Goswami has also been a Fulbright fellow in the United States, at Tufts and Harvard Universities, and was a visiting associate professor at Rutgers University for the 1989-90 academic year. His research focuses on economic history, industrial economics, and theoretical models of corruption.

JAN WILLEM GUNNING is a professor of economics and the director of the Economic and Social Institute at the Free University, Amsterdam. He has been a staff member of the World Bank and a consultant to the International Labour Office and the United Nations and serves on the National Advisory Council of the Dutch minister of development cooperation. Like David Bevan and Paul Collier, Gunning is a member of the Unit for the Study of African Economies at the Institute of Economics at Oxford; with them he ROEMER AND JONES 23

has written Peasantsand Governments:An EconomicAnalysis and Con­ trolled Open Economies: A Neoclassical Approach to Structuralism.

DAVID L. LINDAUER is an associate professZor of economics at Wellesley College and a faculty associate with the Harvard Institute for International Development. He frequently serves as a consultant to the World Bank. Lindauer's research on labor market issues in developing economies has been carried out in Kenya, Malaysia, Malawi, Sierra Leone, Sudan, Zam­ bia, and, most recently, Korea. His work has been published in journals of economics and development.

TRIEN T. NGUYEN is an associate professor of economics at the University of Waterloo, Ontario. Nguyen holds a degree in chemical engineering from the University of California at Berkeley, and received an M.A. in mathe­ matics and a Ph.D. in economics from the University of Western Ontario. His research interests lie in computable general equilibrium modeling of public policy, taxation, international trade, economic development, and economic history.

DETLEV PUETZ is a research analyst in the Food Consumption and Nutrition Program of the International Food Policy Research Institute. He received his master's degree from the University of Bonn, Federal Republic of Germany, where he is currently a Ph.D. candidate. Puetz has been a consultant to the World Bank on a recent project in The Gambia, and his published work inc'.udes IrrigationTechnology andCommercializationof Rice in The Ga,;th'a:Effects on Income andNutrition (with Joachim von Braun and Patrick Webb) and StructuralAdjustment, AgriculturalDevel­ opnent Constraints,andNutrition:Polic'y Options in The Gambia (with Joachim von Braun, Sambou Kinteh, and Ken Johm).

AMAL SANYAL is an associate professor of economics at the Jawaharlal Nehru University, New Delhi, where he also obtained his Ph.D. He has carried'out research oI macroeconomic theory, micro­ economic foundations of macroeconomic theory, development policy, and monetary theory and has presented papers on these subjects to the Econometric Society and the International Economic Association. 24 MARKETS IN DEVELOPING COUNTRIES

Sanyal has also been a visiting professor at the University of Papua New Guinea.

PARKER SHIPTON is an associate at the Harvard Institute for International Development and a lecturer in anthropology at Harvard University. A graduate of Cornell University, Shipton holds an advanced degree from Oxford and a Ph.D. from Cambridge. He has recently been a residential research fellow at the Carter G. Woodson Institute for Afro-American and African Studies at the University of Virginia. Shipton has conducted extended field research in Kenya and The Gambia and has served as a consultant to the governments of those countries as well as to the World Bank and the U.S. Agency for International Development. Shipton is the author of Bitter Monev: CulturalEconomy andSome African Meaningsof Forbidden Commodities.

JOACHIM VON BRAUN is the director of the Food Consumption and Nutri­ tion Policy Program of the International Food Policy Research Institute, where he has focused his research on food subsidy policies, the effects of the commercialization of subsistence agriculture, and the prevention of famines. Von Braun received his doctoral degree from the University of Gbittingen, Federal Republic of Germany, and has served as a consultant to that country's Ministry of Foreign Cooperation, Agency for Technical Cooperation, and Ministry of Agriculture. Von Braun is the author of An Economic Analysis ofPoliciesforFood Security in Developing Countries: The Case of Egypt.

PAN A. YOTOPOULOS is a professor of economics at the Food Research Institute at Stanford University. He has published in the fields ofeconomic development, agricultural economics, international trade, production and consumption theory, and economic demography. He is currently conduct­ ing research on exchange rates, trade and industrial policies for economic development, and the experience of newly industrialized countries. Yotopoulos has been recognized by the American Agricultural Economics Association for professional excellence in published research. ICEG Academic Advisory Board

Abel G. Aganbegyan Yutaka Kosai Academy of Sciences ofthe USSR, Japan Center for Economic Research, USSR Japan Michael J.Boskin Anne 0. Krueger Stanford University, USA (on leav e) Duke University, USA Hakchung Choo Deepak Lal Asian Development Bank, Philippines University College London, Rudiger Dnmbusch United Kingdom Massachusetts Institute of Technology, Ronald 1.McKinnon USA Stanford University, USA Ernesto Fontaine Charles E. McLure, Jr. Pontificia Universidad Cat6lica de ttoover Institution, USA Chile, Chile Gerald M. Meier Herbert Giersch Stanford University, USA Kiel Institute of World Economics, Seiji Naya Germany University ofHawaii, USA Francisco Gil Dfaz FraniscoGiliazJuan Carlos de Pablo Ministry of Finance. Mexico DEPABLOCONSULT, Argentina Malcolm Gillis Affonso Pastore Duke University, USAAfosPatr Universidade de Sdo Paulo, Brazil Arnold C. Harberger Gustav Ranis University ofCalifornia,Los Angeles, Yale Universit,,USA USA Helen Hughes Michael Roemer AustralianNational UniversiHg, Harvard Institutefor International Australia Development, USA

Shinichi Ichimura Leopoldo 5-.1is OsakaInternationalUniversity,Japan Institu'o .,I I P vestigaci6n Econ6mica y Social Lv:as Alamdn, Mexico Glenn Jenkins David Wall Harv'ardInstitutefor International vsitdUniDa ofSusseal UnitedKingdo Development, USA Richard Webb D. Gale Johnson Pontificia Universidad Cat6lica del University ofChicago. USA Perfi, Perti

Roberto Junguito James Worley BancoSudameris, Colombia Vanderbilt University, USA